Do you ever wonder why the iPhone is cheaper in some regions but expensive in others? Is there something called Geographical pricing? And do industries actually price according to regions? Well, guess what? You are in luck today because Sciative is going to unfurl and decode the mystery of geographical pricing in Airlines. Geographical pricing is the practice of setting different prices on the same product or service depending on the consumer’s location. Over the years it has helped businesses optimize their revenue in the short term and gain market share in the long run. However, the unfortunate tradeoff of this strategy is that it can ruffle the feathers of diverse customers due to the price disparity caused between regions. 

In the travel industry, regional pricing takes the lead when generating prices on your inventory. One must cater to the requirements and buying capacity of regional markets on a near real-time basis. Maintaining a delicate balance between all the global prices is also necessary. These in turn keep things truly dynamic!  

Behind the price tags: Factors in Geographical Pricing

Regional pricing is a sub-practice under the dynamic pricing umbrella and it depends on the following factors:

  1. Competition turbulence: Price points keep fluctuating when there is too much competition within a region for similar dates of journey and source-destination combinations

  1. Navigating Local Aviation Policies: Every region has regulations and tax policies on all aviation operations. High taxes, public service policies, fuel prices, and airline parking fees at airports will result in escalated prices.  

  1. Demand dictates: In the pricing process, ‘Demand’ is king and every region has its demand based on cultural, climatic, and seasonality factors. This affects airline pricing throughout the year. 

  1. Economic powerplay: Localised economies and their performance play a big part in the consumer’s purchasing power in a certain region. A good per capita income in a region can make the market extremely lucrative for businesses providing a certain mode of transportation that is priced according to that region’s purchasing power

Region by Region: Navigating the Pricing Landscape

McDonald’s game plan

Everyone knows McDonald’s, the global fast-food sensation, as a savvy traveler navigating the world’s diverse tastes. Just like how they adjust the flavors of a Big Mac to suit local palates, they tailor their prices based on the unique blend of wages and preferences in each country. It’s not just a tasty burger strategy; geographical pricing is a business masterpiece that helps them win hearts and profits worldwide.

Sky-high competition 

Now, let’s soar into the skies with airlines, taking a cue from McDonald’s playbook. Geographical pricing becomes their secret weapon, allowing them to dance through diverse markets, attracting passengers while keeping operational costs in check. The London-Amsterdam route in Europe stands out as a key transportation link in Europe where airlines engage in intra-modal competition amongst each other due to no competition from other modes of transportation. Hence in the affluent region of traveling, the Traveler’s buying behavior depends entirely on airline-specific factors like better seat class, competitive prices, and other ancillary services.

Traveling the Indian way 

But wait, the story takes a twist in India. Here, the transportation game is multi-modal, with buses and trains sharing the stage, and sharing the stage in a major way. According to the Ministry of Road Transport and Highways, the following are the approximate modal shares for passenger transportation in India- Road: 86%, Rail: 11%, Air: 3%, and Water: 2%. This is because Indian travelers are known for being price-sensitive. They weigh their options, not just in terms of flight prices but also considering the allure of luxury buses and efficient trains operated by the Indian Railways

The above case studies suggest that it’s a regional ballet of preferences and purchasing power. Some regions may favor the swift ascent of a flight, while others find solace in the grounded comfort of a well-priced bus or train ticket. In this grand narrative, the Indian consumer’s choices create a symphony where price disparity plays the leading role, and each mode of transport takes its cue from the pulse of the region. This is very well contrasted by the London- Amsterdam region where the higher purchasing power of people compels them to take a more luxury option available at higher prices.

Well, folks! Welcome to the world where pricing isn’t just about numbers; it’s a captivating tale of regions, people, and the fascinating dance of diverse markets.

Uncovering Fault Lines: Examining Gaps in Current Systems

Tracking the regional geographical factors for the travel industry poses a significant challenge, and existing revenue management systems have largely overlooked them. This results in major gaps forming in conventional revenue management systems which are as follows:

  1. Intra-modal competition data of different carriers is often insufficient or collected at a very slow pace leading to delays. This leaves businesses with inventory price points that are inefficient due to latency in consumption and collection of data.

  1. Multi-modal travel factors aren’t taken into account while pricing airlines according to regions. Tracking multi-modal travel in price-sensitive regions like India becomes very pertinent. The failure to capture the true demand picture by looping in all modes of travel in turn leads to lousy price points on inventory, causing major revenue leaks

  1. Region-specific factors like government policies and fuel prices are complex variables to monitor and incorporate when generating price points on inventory. This can lead to revenue losses through operational costs when the region is not taken into account. 

  1. Pan-region travel carriers are left scratching their heads over varying demand patterns in different regions. These demand patterns vary due to seasonality factors specific to that region. 

Negligence to these factors will lead to the following:

  • Discouraging customers from buying your overpriced tickets

  • Leave you with revenue losses on underpriced tickets.

AirViaje.ai: Unleashing the Future of Pricing Magic

Step into the future of regional pricing strategies with AirViaje.ai. Our cutting-edge price optimization AI bot considers regional parameters, ensuring dynamic price points that are updated every 15 minutes across varied regions!

We’ve got you covered for all your revenue optimization needs as we are providing a bundle of features that lets the airlines make sky-high profits.

  1. AirViaje.ai ‘s real-time Intra and multi-modal competition tracking keeps you on top of your competition, saves you from copy-cat pricing, and adds more profits in your pockets.

  2. Our 98% Accurate Demand-forecasting capabilities every 15 minutes never let your airline lose sight of revenue opportunities. 

  3. Our Real time automatic price reflections infused with Actionable insights relieve the airline from the claws of gut-feel-based pricing and let them maximize all revenue opportunities.

  4. Our region-agnostic tech stack can track and price flights for multiple regions.

  5. Well, that’s not enough! Our Policy-infused price points on airline inventory take into account regional policies as well. To put our words into action, an excellent example of this is the  RCS (Regional Connectivity Scheme) in India, wherein AirViaje.ai ’s deep learning algorithms already take into account such intricate government policies while pricing the airline Inventory.

Thus, in the new era of pricing, Geographical pricing is here to stay, and we have it all figured out so that your airline is not left behind on the runway.

Book a free demo of our automated travel solutions or contact our optimization experts at info@sciative.com.

To see how AirVijaje.ai can empower your brand, ensuring it not only survives but thrives, visit sciative.com

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